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Friday, 13 August 2010

Global Crisis 2008-2010: Lessons Learned (Jon Kofas, Greece)

History shows that deeply entrenched institutional interests prevent society from making progress and avoiding mistakes of the past that range from economic to military crises. The lesson from the Vietnam War was to do it with lower overall cost (financial, military and political) next time. Early indications are that the financial elites have learned nothing from the recent economic crisis, other than to concentrate capital at any social and political cost and circumvent legal hurdles. When the Vietnam War ended an entire industry of scholars, journalists, politicians, and military officers engaged in the debate of “lessons” so as not to repeat the “mistakes” of the past. Naturally, the “lessons of Vietnam” ranged from embracing neo-isolationist to giving the military a free hand to do its job next time it invades a Third World country. The “Rockefeller Managerialists” that Jimmy Carter brought to his cabinet ran foreign policy from the perspective that the Vietnam War had weakened the US economy and that imperialism does not have to assume the form of militarism to achieve the goal of global economic integration. Within a few years after the fall of Saigon, Vietnam was integrated into the world capitalist system, thus vindicating the “Managerialists,” but also proving in the long-term the US won the Vietnam War.
However, the right-wing manufactured image of a weak America (politically, economically, and militarily) persisted after the Nicaraguan and Iranian revolutions, at a time that Japan and Europe were also posing a challenge to the US economy. Of course, there were immense profits to be made by reverting to “Containment Militarism” (Keynesian Militarism), initially the ideology responsible for US involvement in Vietnam. When Reagan came to office he brought with him the “Containment Militarists” to conduct foreign and defense policy and the neo-liberals for fiscal, economic and trade policy. The ultimate goal was to strengthen defense and accelerate the nuclear arms race with the USSR. To help fund exorbitant defense spending, the Reagan militarists and neo-liberals had to weaken the welfare state and strengthen the corporate welfare regime. Despite mini-economic recessions of the 1980 and 1990s, the neo-liberal ideology accompanied by globalization took hold and spread around the world, emboldened of course with Communism’s downfall.
The deep recession of 2008-2010 exposed the myth that Keynesian Militarism and corporate welfare could be sustained by an overstretched credit economy, especially given the growing parasitic nature of finance capitalism. At the outset of the current global economic crisis, many politicians, journalists, and analysts of all types began to question neo-liberalism and Keynesian Militarism as implemented in Iraq and Afghanistan. The combination of parasitic finance capitalism that led to the real estate crisis after Lehman Brothers went belly up, Hedge Funds scandals and other scams, as well as immense US defense spending led to a global crisis. Naturally, finance capitalism resting on “debt and scam” was not confined to the US, but was indeed a global phenomenon. American-Style capitalism, consumerist culture, globalization, and neo-liberal ideology were popular with the political and financial elites. The economic crisis, however, forced the G-20 to inject capital equivalent to one-third of their GDP to save finance capitalism. To justify the massive transfer of capital from the general taxpayer to finance capital, governments promised that the lesson learned was tighter regulation. The banks took the money and consolidated their positions, but almost immediately refused to accept regulatory requirements of “rationalizing the system” to avert another deep recession in the future. Why should a bank executive whose compensation is 500 times higher than the average worker’s suffer the indignity of bonus cuts and stock options? Having stabilized the banking system in the first phase, the state turned to stabilizing the economy by asking working and middle-class taxpayers to suffer higher unemployment and lower living standards.
The credit economy is over-stretched globally and that means investment speculation and scams in a number of areas from currency to government bonds; also the phase the world is currently experiencing. In the first week of May 2010, EU leaders strongly condemned bond and currency speculation for destabilizing the European economy. In an interview for Russian TV, Obama agreed that indeed monetary instability in the EU, undermined by bond and currency speculators, does not serve US interests. Because the euro is the reserve currency representing the most powerful economic bloc in the world, monetary instability does not serve the interests of any country other than speculators. Precisely because the credit system is strained owing to the 2008-2010 crisis when both governments and private sector are chasing limited credit, the G-20 have agreed that economic recovery cannot take hold in the absence of monetary stability with the state as guarantor. Toward that end, the EU’s ECOFIN today (9 May 2010) is scheduled to announce stabilization fund of about 600 billion euros to ensure eurozone monetary stability and to help members whose bonds are targets for market speculation, a process that seriously impedes economic growth.
Not only is Southern Europe EU’s weak link, with Greece leading the “PIGS,” there is concern that France may be overextended, despite its banks profiting from government bond speculation. Against such a reality, Germany softened its stance on monetarist orthodoxy for eurozone members. As long as the economic crisis is lingering, the state will be guiding finance capitalism away from its own predatory, self-destructive, and manipulative “Invisible Hand.” What will the political elites do to check the role of the financial elites once the economy assumes a steady growth mode later in the decade? Finance capitalism has its own internal dynamics driven solely by accumulation. Anything short of institutional structures to counterbalance finance capitalism’s predatory orientation will lead to cyclical crises that will have a detrimental impact on the social structure and political landscape. Have the political elites learned the lessons of “neo-liberalism gone madly crooked,” or are they likely to repeat the mistakes of the past, as was the case with those claiming they learned the lessons of Vietnam?
Corporate elites fund political campaigns. Corporate elites also have the advantage of lobbying. Corporate elites enjoy the weight of status in a system that prays on their altar. The assumption that neo-liberal measures are the solution to economic growth, social and political stability is the lesson deeply ingrained in society. This mode of thinking is not just in Goldman-Sachs executives who have a profit motive to see the world in such distorted light, but regrettably in people who lost their money in this latest crisis. This lesson never learned will most definitely lead to far greater disasters in the future and bring society closer to social discontinuity.

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